How can your family continue to benefit from your business after you’re gone? Who will make decisions about your business, and how? These questions may not come up often when you’re busy running a small business, but they are worth considering. The earlier you plan your estate, the more security you can offer yourself, your partners, and your family in the long run.
A Trust or Will is an essential part of any estate plan, allowing you to direct how your personal assets will be disposed and your business assets will be managed should you die. Make sure you provide for access to any related digital assets they may need to manage, such as your online bank accounts, email accounts, and social media profiles. You can also give power of attorney to someone you trust to handle your affairs while you are alive, but not able to work and manage your money, property and business. If you should become incapacitated, your designated “Attorney in Fact” can manage your business assets, access your finances, make payroll, and pay creditors on your behalf.
A buy-sell agreement can come in handy after a bankruptcy, divorce, death, or disability, but it’s not all doom and gloom. The contract outlines the plan your business will follow if one of the owners dies or becomes incapacitated. It officially documents the sale price for the business, your share of the business, and who will subsequently become involved in the business. For instance, you can specify that you want your partners to buy out your share, that you want your heirs to sell your portion, or that you want to prevent a specific person from becoming involved in the business.
You likely have a vision for the future of your business, but have you thought about who will take the reins after you? Do you think certain family members or employees would be perfect to take over ownership, or fulfill key executive and managerial duties? That’s where your succession plan comes in. Rather than relinquish all control over your business, you can determine how some decisions will be made in the future: how the business will hire new employees, pay and promote family members, resolve disputes, and more.
Be aware that the estate tax that can amount to 35-50% of your business’ value, and for non-U.S. persons, it may be an even larger portion. To help your heirs to avoid selling the business after your death to cover the tax, seek guidance from a tax attorney about the Section 303 tax break. This gives your estate a one-time opportunity to redeem your stock with minimal tax cost as long as the stock value exceeds 35% of your estate. Section 6166 allows your personal representative to pay the estate tax in installments over several years, giving your business time to earn money towards the taxes owed.
If you need assistance in creating the perfect estate plan, you should call a trustworthy law firm. Attorney Jack Sturgill can help you choose the best family and estate planning options to suit your needs. Give him a call to protect your business, your family, and your legacy.